- First, Cisco Systems Inc. (Nasdaq: CSCO) emerged from optical hibernation to acquire components company CoreOptics Inc. Although CoreOptics' current product is aimed at 40G, Cisco made clear in its announcement that the strategic aim of the acquisition was the 100G market to come. (See Cisco to Acquire CoreOptics and Cisco Renews Optical Focus With CoreOptics.)
- The next day, Infinera Corp. (Nasdaq: INFN) announced it is accelerating development of 100G photonic integrated circuits (PICs), with a new schedule that will bring them to market roughly 18 months faster than originally planned. To accelerate its 100G timetable, the company is halting its internal development of a 40G PIC and will use commercially available 40G components instead. (See Infinera Sets 100G Agenda and Infinera Ditches 40G, Talks 100G.)
The 100G messages from these vendors resonate with the messages we heard from network operators at Light Reading's Packet-Optical Transport Evolution conference last week, including Telus Corp. (NYSE: TU; Toronto: T) VP of Technology Strategy Zouheir Mansourati, who called 40G a "stopgap measure" on his company's road to the endgame.
We think that the industry support behind 100G has reached a critical mass so that – for the first time – we are beginning to question the future utility of 40G DWDM technology. Infinera president and CEO Tom Fallon described the problem 40G faces as "the 40G squeeze" – meaning that 40G is destined to get squeezed between the continuing popularity of 10G transport and the future uptake of 100G transport.
We like this description, and we agree that 40G is increasingly looking like a technology without a permanent home -- the third-party candidate in a two-party political race, to use an analogy. In the near future, operators with big bandwidth needs will choose 100G, and those that don't require 100G will stick with 10G. The biggest problem for 40G is that, so far, it has been unable to compete with 10G on price – as 10G cost curves have been too steep for 40G to match. Forget about 40G pricing at 2.5x10G transponder pricing. From what we've been told, 40G can't even compete with 10G at 4x10G pricing!
Returning to the political party analogy, third-party candidates often serve a significant purpose in bringing issues to the forefront that would otherwise be buried in the debate. Here, 40G has indeed served a useful purpose in compelling the industry to take a much more standardized approach to 100G development – work that is now being spearheaded by the Optical Internetworking Forum (OIF) and includes dual-polarization QPSK modulation and coherent detection as well as standardized form factors to which components vendors can build.
However, with 100G now well on its way, perhaps the optical networking industry as a whole would be best served by retiring work on 40G and focusing full-steam on bringing 100G to market. The clear benefit of doing this is focusing limited industry resources on a single purpose and, as a result, speeding 100G to market at economical price points (possibly even profitable ones). On the other hand, what is the real value of pressing forward with 40G development, knowing that it can't compete with 10G on pricing or with 100G on capacity?
— Sterling Perrin, Senior Analyst, Heavy Reading